Fulgent Sun International (Holding) (TWSE:9802) Is Due To Pay A Dividend Of NT$2.00

Fulgent Sun International (Holding) Co., Ltd. (TWSE:9802) has announced that it will pay a dividend of NT$2.00 per share on the 18th of April. This means the dividend yield will be fairly typical at 4.5%.

Check out our latest analysis for Fulgent Sun International (Holding)

Fulgent Sun International (Holding)'s Future Dividends May Potentially Be At Risk

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Fulgent Sun International (Holding)'s dividend was only 67% of earnings, however it was paying out 179% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the company can't turn things around, EPS could fall by 8.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 133%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from NT$2.00 total annually to NT$5.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, Fulgent Sun International (Holding)'s earnings per share has shrunk at approximately 8.5% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Fulgent Sun International (Holding)'s Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Fulgent Sun International (Holding) that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.